Commentators have argued that President-Elect Trump’s various business interests, including in the D.C.-based Trump Hotel, may create constitutional problems under the Emoluments Clause. See, e.g., “Trump’s Hotel Lodges a Constitutional Problem,” Bloomberg View (Nov. 21, 2016). As relevant here, the Emoluments Clause prevents a person holding a federal office from accepting any “present” or “emolument” of any kind from any foreign country, unless Congress consents. Foreign diplomats have recently stayed at the Trump Hotel and this raises questions about whether, if this practice continues after inauguration, any lodging fees collected in connection with their stays would constitute the acceptance of a present (gift) or emolument by Trump.
Though historical materials on the Emoluments Clause are sparse, the available authorities make it doubtful that income from a diplomatic stay will automatically create a constitutional problem under the Emoluments Clause. As discussed below, the hotel income from diplomatic stays likely does not reflect (1) a present/gift or (2) an emolument.* (UPDATE 1/30/17: For a comprehensive analysis of all relevant legal authorities, see my full-length law review article, The Foreign Emoluments Clause and the Chief Executive.)
(1) Present/Gift. Regarding the gift issue, there are no indications that the diplomats will pay other than the going market rate for their hotel rooms (that is, the the diplomats will pay the same rate charged to any member of the public, including U.S. persons). In these circumstances, it’s difficult to see how the hotel reservation fees constitute the payment of a gift under the Emoluments Clause. Generally speaking, a gift is a voluntary transfer of property to another without compensation, see Black’s Law Dictionary (10th Ed.), although sometimes a narrower definition applies, which takes into account the subjective motivations of the transferor. See, e.g., Commissioner v. Duberstein, 363 U.S. 278, 285 (1960) (adopting definition of gift under income tax law that focuses on the transferor’s donative intent, rather than relying on common law definitions). But though a precise, universal definition of gift may remain elusive, that term does not include the purchase of a good or service at the market price. In fact, a quid pro quo market exchange is the precise opposite of a gift transaction.
However, there is some confused commentary about this. A Think Progress article posits that foreign diplomats stay in the Trump Hotel not because the hotel charges a reasonable rate, but because of “the added value that comes from doing business with the President of the United States,” thereby suggesting that the payment of their hotel fees constitutes the payment of a gift. Yet it’s hard to see how the subjective feelings of a customer can transform an arm’s-length purchase of services into a voluntary gift. Are we really to believe that a U.S. citizen who stays at the Trump Hotel because he enjoys its accommodations has simply paid for lodging services, while the diplomat sleeping in the room next door, who paid the same price for the same services, has made a “gift” because she subjectively hopes that the President-Elect will favor her in business dealings? Surely not. Even if one abandons the common law definition of a gift (which requires a transfer without consideration) and somehow believes that the federal income tax law’s subjective approach controls the interpretation of the Emoluments Clause, the presence of a quid pro quo (the provision of a hotel room) negates the “gift” characterization. See Restatement (Third) of Property (Wills & Don. Trans.) § 6.1(a) Comment b (2003) (“The relevant criterion [for a gift] is intent to transfer an ownership interest gratuitously, as opposed to engaging in an exchange transaction or making an involuntary transfer.”).
Of course, the analysis would become more complicated if, for example, the Trump Hotel charged diplomats a higher price than that ordinarily paid by members of the general public. In these circumstances, we may properly analyze the facts to determine whether the amount paid in excess of the standard rate reflects an indirect gift to Trump. But absent facts like these, or other facts suggesting the diplomats are paying an above-market rate to obtain personal services from Trump (as opposed to only lodging services from the hotel), the diplomats have not made gifts to Trump.
2. Emolument. Unlike a gift, an “emolument” can reflect a quid pro quo transaction. For example, if Russia offered a $100,000 salary to the Secretary of the Treasury in exchange for sharing economic insights gleaned from her office, that would very likely reflect an emolument, even though the transaction was structured as a payment in exchange for services. See Office of Legal Counsel, Memorandum from Deputy Assistant Attorney General Samuel Alito, 1986 WL 1239553 (May 23, 1986) (“[A] stipend or consulting fee from a foreign government would ordinarily be considered an ‘emolument’ within the meaning of the constitutional prohibition.”).
But the facts are more difficult for the Trump Hotel because the amounts paid by diplomats do not relate to the provision of services by Trump in his capacity as President, or even from him personally. Rather, the amounts are paid in exchange for lodging services provided by the Trump Hotel, a separate legal entity, part of the Trump Organization, involved in an activity distinct from running the White House. Thus, a question arises: Does a holder of a federal office receive an “emolument” when he indirectly receives an amount from a foreign government through the provision of services not personally provided by him and of a character unrelated to his government position?
Various sources suggest a negative answer to this question, indicating that the common definition of emolument refers to amounts received in connection with the performance of services as an officer or employee. Black’s Law Dictionary, for example, defines an emolument as “[a]ny advantage, profit, or gain received as a result of one’s employment or one’s holding of office.” (emphasis added). The U.S. Supreme Court has similarly characterized emoluments, stating that they “embrac[e] every species of compensation or pecuniary profit derived from a discharge of the duties of the office.” Hoyt v. United States, 51 U.S. (10 How.) 109, 135 (1850) (emphasis added). See also Office of Legal Counsel, Memorandum of Assistant Attorney General J. Lee Rankin (Oct. 4, 1955) (“[T]he term ‘emolument’… was intended to cover compensation of any sort arising out of an employment relationship with a foreign state.”) (emphasis added) (as cited in Office of Legal Counsel Opinion (May 24, 2001)); Hamilton, Federalist No. 73 (referring to Congress’s power to set the “salary and emoluments of the [President]”).
If foreign diplomats are paying a market rate to the Trump Hotel, then any profit or gain would not be a “result of” or “derived from” from the Office of the President, or from the provision of services by Trump personally, but would rather reflect profit or gain to the Trump Hotel from the provision of lodging services. Thus, these payments, arising in the ordinary course of business, likely do not constitute emoluments under the Constitution.
The meaning of “emolument,” as used elsewhere in the Constitution, supports this interpretation. Article II, Sec. 1, Clause 7 states that the President, during his time in office, shall receive a fixed compensation but not “any other Emolument from . . . any of [the States].” This language probably discourages any particular state from trying to buy special treatment from the President through, for example, offering him additional compensation.
However, we can easily imagine circumstances where the President receives payments from one of the several states while he is President. For example, if the President lives in a state that offers a generally applicable, refundable, per-child tax credit, and the President claims the credit on his state tax return, he would have received a clear financial benefit from a state. But it would be surprising if the receipt of such a tax credit established a Constitutional violation. The term “emoluments” in Article II seems directed towards payments made by a state to the President in his capacity as such, and not literally to any payment made by a state to him. See Office of Legal Counsel Opinion (June 23, 1981) (“[T]he receipt by President Reagan of his California retirement benefits does not violate [the Emoluments Clause] because those benefits are not emoluments in the constitutional sense.”). See also Should Congress Impeach Obama for His Emoluments Clause Violations?, Yale J. on Reg.: Notice & Comment (Dec. 13, 2016).
It is thus doubtful that the receipt of payments by the Trump Hotel from foreign diplomats automatically establishes the acceptance of a gift or emolument by Trump. If the Trump Hotel has a range of guests and charges foreign government guests the prevailing market rates, the Emoluments Clause shouldn’t apply. Also, as discussed on the Volokh Conspiracy blog, there are various other obstacles to establishing an Emoluments Clause violation with respect to Trump. And Seth Barrett Tillman argues that the Emoluments Clause does not even reach the President or any other elected officials, and that it refers only to appointees. But see Office of Legal Counsel Opinion (December 7, 2009) (concluding, without analysis, that the President is “surely” covered by clause).
Of course, one could make some strong policy arguments against a President having any financial relationship with a foreign government, whether or not connected to his office. Cf. Office of Legal Counsel Opinion (March 1, 1994) (noting that officers may be biased or have divided loyalties if they receive financial benefits from a foreign government, even if their office and duties do not relate to the performance of political, military, or diplomatic functions). However, the text of the Emoluments Clause does not generally prohibit any arrangement which could potentially lead to a conflict. It instead describes specific types of prohibited arrangements. If the Trump Hotel provides lodging services to foreign diplomats at a market rate, that economic arrangement would not come within the situations reached by the Emoluments Clause.
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*N.B. I do not doubt the many potential conflicts of interest questions raised by Trump’s business activities. My analysis here focuses solely on the textual interpretation of the Emoluments Clause under a stylized set of facts.
This post will be occasionally updated with additional authorities. Last updated 1/30/17, to include a link to my full-length article, The Foreign Emoluments Clause and the Chief Executive.